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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1999
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Commission File Number: 1-14371
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INFORMATION HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1518007
(State of incorporation) (IRS Employer Identification Number)
2777 SUMMER STREET, SUITE 209
STAMFORD, CONNECTICUT 06905
(Address of principal executive offices) (Zip Code)
(203) 961-9106
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. /X/ Yes / / No
As of June 30, 1999, there were 16,943,189 shares of the Company's
common stock, par value $0.01 per share outstanding.
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INFORMATION HOLDINGS INC.
INDEX
<TABLE>
<CAPTION>
Page Number
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets 1
As of June 30, 1999 (Unaudited) and December 31, 1998
Consolidated Statements of Operations (Unaudited) for the 2
Three Months Ended June 30, 1999 and 1998 and
Six Months Ended June 30, 1999 and 1998
Consolidated Statements of Cash Flows (Unaudited) for the 3
Six Months Ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
</TABLE>
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INFORMATION HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 54,730 $ 57,270
Accounts receivable (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS AND
SALES RETURNS OF $307 AND $911, RESPECTIVELY) 7,117 9,286
Inventories 5,192 4,832
Prepaid expenses and other current assets 2,847 1,945
Deferred income taxes 777 777
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Total current assets 70,663 74,110
Property and equipment, net 4,273 4,173
Pre-publication costs (NET OF ACCUMULATED AMORTIZATION OF $2,065 AND
$2,350, RESPECTIVELY) 3,202 3,474
Publishing rights and other intangible assets, net 23,565 21,601
Other assets 1,613 1,369
Deferred income taxes 64 64
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TOTAL $ 103,380 $ 104,791
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capitalized lease obligations $ 267 $ 261
Accounts payable 2,672 4,074
Accrued expenses 655 1,821
Royalties payable 1,963 1,935
Deferred subscription revenue 7,434 8,530
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Total current liabilities 12,991 16,621
Capital leases 2,554 2,694
Other long-term liabilities 823 683
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Total liabilities 16,368 19,998
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STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; none issued $ -- $ --
Common stock, $.01 par value; 50,000,000 shares
authorized; 16,943,189 issued and outstanding 169 169
Additional paid-in capital 84,750 84,750
Retained earnings(deficit) 2,093 (126)
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Total stockholders' equity 87,012 84,793
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TOTAL $ 103,380 $ 104,791
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</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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INFORMATION HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Revenues $ 12,977 $ 10,345 $ 25,032 $ 21,073
Cost of sales 3,542 2,518 6,743 5,376
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Gross profit 9,435 7,827 18,289 15,697
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Operating expenses:
Selling, general and administrative 7,100 6,347 13,682 12,319
Depreciation and amortization 1,056 1,293 2,058 2,571
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Total operating expenses 8,156 7,640 15,740 14,890
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Income from operations 1,279 187 2,549 807
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Other income (expense):
Interest income 640 85 1,251 225
Interest expense (75) (54) (144) (157)
Other expense (18) -- (18) --
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Income before income taxes 1,826 218 3,638 875
Provision for income taxes 719 36 1,419 92
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Net income $ 1,107 $ 182 $ 2,219 $ 783
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Net income per common share amounts:
Basic earnings $ 0.07 $ 0.13
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Diluted earnings $ 0.06 $ 0.13
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Pro forma income data:
Income before income taxes, as reported $ 218 $ 875
Pro forma income taxes 36 92
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Pro forma net income $ 182 $ 783
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Pro forma earnings per share $ 0.01 $ 0.05
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</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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INFORMATION HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
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1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,219 $ 783
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 755 549
Amortization of intangibles 1,303 2,022
Amortization of pre-publication costs 1,210 1,108
Loss on disposal of property and equipment 18 --
Changes in operating assets and liabilities:
Accounts receivable, net 2,592 1,594
Inventories (361) (176)
Prepaid expenses and other current assets (920) (1,063)
Accounts payable and accrued expenses (2,952) (1,582)
Royalties payable 28 (33)
Deferred subscription revenue (1,096) (591)
Other, net (176) (367)
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Net Cash Provided by Operating Activities 2,620 2,244
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 11 --
Purchases of property and equipment (719) (295)
Pre-publication costs (779) (594)
Acquisitions of businesses and titles (3,539) (160)
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Net Cash Used in Investing Activities (5,026) (1,049)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under revolving credit facility -- (2,000)
Net repayments under capital leases (134) (113)
Capital contributions -- 11
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Net Cash Used in Financing Activities (134) (2,102)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (2,540) (907)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 57,270 10,280
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 54,730 $ 9,373
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</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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INFORMATION HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A. BASIS OF PRESENTATION
The consolidated balance sheet of Information Holdings Inc. (IHI , or
the Company) at December 31, 1998 has been derived from IHI's Annual
Report on Form 10-K for the year then ended. All other consolidated
financial statements contained herein have been prepared by IHI and are
unaudited. The financial statements should be read in conjunction with
the financial statements for the year ended December 31, 1998 and the
notes thereto contained in IHI's Annual Report on Form 10-K for the
year then ended.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Article 10 of Regulation S-X for interim
financial statements required to be filed with the Securities and
Exchange Commission and do not include all information and footnotes
required by generally accepted accounting principles for complete
financial statements. However, in the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary
to present fairly the financial position of IHI as of June 30, 1999,
and the results of their operations and their cash flows for the
periods presented herein. Results for the three and six months ended
June 30, 1999 are not necessarily indicative of the results to be
expected for the full fiscal year.
B. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Inventories at June 30, 1999 and December 31, 1998
consist solely of finished goods. The vast majority of inventories are
books, which are reviewed periodically on a title-by-title basis for
salability. The cost of inventory determined to be impaired is charged
to income in the period of determination.
C. PRE-PUBLICATION COSTS
Certain expenses related to books, primarily comprised of design and
other pre-production costs, are deferred and charged to expense over
the estimated product life. These costs are primarily amortized over a
four-year period following release of the applicable book, using an
accelerated amortization method. During 1999, the Company removed from
its Balance Sheet fully amortized Pre-publication costs with a cost of
approximately $1,645,000.
D. PURCHASE OF MASTER DATA CENTER
As previously announced, the Company entered into an agreement in May,
1999 to acquire 100% of the stock of Master Data Center, Inc. (MDC) for
cash consideration of approximately $33,000,000. MDC provides patent
annuity payment services and complementary software products for
managing patent and trademark portfolios. The transaction is expected
to be completed during the third quarter of 1999.
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INFORMATION HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
E. EARNINGS PER SHARE DATA
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
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June 30 June 30
<S> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1999 1999
Basic:
Net income $ 1,107 $ 2,219
Average shares outstanding 16,943 16,943
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Basic EPS $ 0.07 $ 0.13
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Diluted:
Net income $ 1,107 $ 2,219
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Average shares outstanding 16,943 16,943
Net effect of dilutive stock options -
based on the treasury stock method 202 180
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Total 17,145 17,123
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Diluted EPS $ 0.06 $ 0.13
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</TABLE>
No historical earnings per share data are presented for the three
months and six months ended June 30, 1998 as the Company does not
consider such data meaningful. The pro forma earnings per share data
presented were computed using 16,943,189 shares outstanding, which
reflects all shares outstanding following the initial public offering,
as if such shares were outstanding since January 1, 1998.
F. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June of 1999, the Financial Accounting Standards Board (FASB) issued
Statement No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133.
The Statement defers for one year the effective date of FASB Statement
No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards for
derivative instruments and for hedging activities. The rule will now
apply to all fiscal quarters of all fiscal years beginning after June
15, 2000. In the opinion of the Company's management, adoption of this
new accounting standard will not have any impact on the Company's
consolidated financial position or results of operations.
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INFORMATION HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
G. SUBSEQUENT EVENTS
On July 19, 1999, the Company acquired all of the assets of Faxpat,
Inc. (Faxpat) for cash consideration of approximately $9,300,000.
Faxpat is a leading provider of patent documents and file histories to
the legal and corporate markets.
In July 1999, the Company signed a commitment letter to enter into a
seven-year revolving credit facility in an amount not to exceed
$50,000,000 initially, including a sublimit for the issuance of standby
letters of credit (the Credit Facility). The Credit Facility may be
increased to $75,000,000, subject to certain conditions. The proceeds
from the Credit Facility are intended to be used to fund acquisitions,
meet short-term working capital needs and for general corporate
purposes, and to pay fees and expenses incurred in connection with the
Credit Facility. Borrowings under the Credit Facility bear interest at
either the higher of the bank's prime rate and one-half of 1% in excess
of the overnight federal funds rate plus a margin of 0.50% to 1.25% or
the Eurodollar Rate plus a margin of 1.5% to 2.25% depending on the
Company's ratio of indebtedness to earnings before interest, taxes,
depreciation and amortization. The Credit Facility is secured by a
first priority perfected pledge of all notes and capital stock owned
and a first priority perfected security interest in all other assets,
subject to certain exceptions owned by the Company and all direct and
indirect operating subsidiaries and will be guaranteed by the Company
and such subsidiaries. Under the terms of the Credit Facility, the
Company is required to maintain certain financial ratios and meet other
financial conditions. The Credit Facility also prohibits the Company
from incurring certain additional indebtedness, limits certain
investments, mergers or consolidations and restricts substantial asset
sales, and dividends. Financing related to the bank Credit Facility is
expected to be completed by August 31, 1999.
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INFORMATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Three Months Ended June 30, 1999 Compared to
Three Months Ended June 30, 1998
REVENUES. In the second quarter of 1999, the Company had revenues of
$13.0 million compared to revenues of $10.3 million in the second quarter of
1998, an increase of $2.6 million or 25.4%. The increase in revenues is
primarily due to an increase of $0.8 million in international book sales; an
increase of $0.6 million in Internet sales of patent information; an increase of
$0.5 million in CRC Press electronic product revenues; an increase of $0.5
million in domestic book sales; and an increase of $0.4 million in sales of
patents and file histories related to Optipat, which was acquired in January
1999.
COST OF SALES. Cost of sales increased $1.0 million or 40.7% to $3.5
million in the second quarter of 1999 compared to $2.5 million in the
corresponding quarter in 1998. Cost of sales expressed as a percentage of
revenues in the second quarter of 1999 increased to 27.3% from 24.3% for the
corresponding quarter of 1998. The increase in the costs of sales over the
comparable period in 1998 is primarily attributable to the acquisition of
Optipat which has a higher cost structure than MicroPatent and higher costs at
CRC Press primarily related to book publishing operations and investments in
electronic products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A). S,G&A expenses
increased $0.8 million or 11.9% in the second quarter of 1999, to $7.1 million
from $6.3 million in the second quarter of 1998, principally as a result of
increased personnel costs at CRC Press, due to business growth, and operating
expenses of Optipat. S,G&A expenses as a percentage of revenues decreased to
54.7% in the second quarter of 1999, compared to 61.4% in the corresponding 1998
quarter.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization in the
second quarter of 1999 decreased $0.2 million, or 18.3%, to $1.1 million from
$1.3 million in the corresponding quarter in 1998, due primarily to decreased
amortization of intangible assets.
INTEREST INCOME. Interest income increased to $0.6 million from $0.1
million due primarily to interest earned on the proceeds from the initial public
offering.
INCOME TAXES. The provision for income taxes as a percentage of pre-tax
income for the three months ended June 30, 1999 is 39.4%. This compares with an
effective tax rate of 16.5% in the prior year. The Company did not record a
provision for Federal income taxes in the prior year period due to the use of
net operating loss carry-forwards.
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INFORMATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Six Months Ended June 30, 1999 Compared to
Six Months Ended June 30, 1998
REVENUES. In the first six months of 1999, the Company had revenues of
$25.0 million compared to revenues of $21.0 million in the first half of 1998,
an increase of $4.0 million or 18.8%. The increase in revenues is primarily due
to an increase of $1.3 million in international book sales; an increase of $1.1
million in Internet sales of patent information; an increase of $1.1 million in
CRC Press electronic product revenues; and an increase of $1.0 million in sales
of patents and file histories related to Optipat. All other revenues decreased
$0.5 million due to several factors, including timing of product releases.
COST OF SALES. Cost of sales increased $1.3 million or 25.4% to $6.7
million in the first half of 1999 compared to $5.4 million in the corresponding
period in 1998. Cost of sales expressed as a percentage of revenues in the first
six months of 1999 increased to 26.9% from 25.5% for the corresponding period of
1998. The slight increase in the costs of sales over the comparable period in
1998 is primarily attributable to the acquisition of Optipat which has a higher
cost structure than MicroPatent and higher costs at CRC Press primarily related
to book publishing operations and investments in electronic products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A). S,G&A expenses
increased $1.4 million or 11.1% in the first six months of 1999, to $13.7
million from $12.3 million for the first half of 1998, principally as a result
of increased personnel at CRC Press and operating expenses of Optipat. S,G&A
expenses as a percentage of revenues decreased to 54.7% in the first half of
1999, compared with 58.5% in the corresponding 1998 period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
first half 1999 decreased $0.5 million, or 20.0%, to $2.1 million from $2.6
million in the corresponding period in 1998, due primarily to decreased
amortization of intangible assets.
INTEREST INCOME. Interest income increased to $1.3 million from $0.2
million due primarily to interest earned on the proceeds from the initial public
offering.
INCOME TAXES. The provision for income taxes as a percentage of pre-tax
income for the six months ended June 30, 1999 is 39.0%. This compares with an
effective tax rate of 10.5% in the prior year. The Company did not record a
provision for Federal income taxes in the prior year period due to the use of
net operating loss carry-forwards.
FINANCIAL CONDITION:
Prior to August 1998, the financing requirements of the Company have been funded
through cash generated by operating activities and capital contributions from
the founding stockholders. In August 1998, the Company completed an initial
public offering of its common stock to raise funds. In July 1999, the Company
signed a commitment letter to enter into a seven-year revolving credit facility
in an amount not to exceed $50,000,000, including a sublimit for the issuance of
standby letters of credit (the Credit Facility). The proceeds from the Credit
Facility are intended to be used to fund acquisitions, meet short-term working
capital needs and for general corporate purposes, and to pay fees and expenses
incurred in connection with the Credit Facility.
See Note G - SUBSEQUENT EVENTS.
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INFORMATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Cash and cash equivalents totaled $54.7 million at June 30, 1999 compared to
$57.3 million at December 31, 1998. Excluding cash and cash equivalents, the
Company had working capital of $2.9 million at June 30, 1999 compared to working
capital of $0.2 million at December 31, 1998. Since the Company receives
subscription payments in advance, the Company's existing operations are expected
to maintain low or negative working capital balances, excluding cash. Deferred
subscription revenues, a non-cash obligation included in current liabilities,
totaled $7.4 million at June 30, 1999.
Cash generated by operating activities was $2.6 million for the six months ended
June 30, 1999, derived from net income of $2.2 million plus non-cash charges of
$3.3 million less an increase in operating assets, net of liabilities of $2.9
million. This increase in operating assets and liabilities is primarily the
result of payment of expenses related to book publishing operations and the
payment of income tax liabilities, offset by collections of customer
receivables.
Cash used in investing activities was $5.0 million for the six months ended June
30, 1999 due to capital expenditures, including pre-publication costs, of $1.5
million and acquisition costs of $3.5 million. Excluding acquisitions of
businesses and titles, the Company's existing operations are not capital
intensive.
Cash used in financing activities was $0.1 million for the six months ended June
30, 1999, related to payments on approximately $2.8 million of capitalized lease
obligations. The Company currently has no additional debt obligations as of June
30, 1999. As noted above it is the Company's intention to enter into a Revolving
Credit Facility agreement, to provide the Company with expanded capacity for
future acquisitions and working capital needs as they arise.
The Company believes that net cash provided by operations, together with cash on
hand and other available sources of funds, will be sufficient to fund the cash
requirements of its existing operations. Excluding acquisition activity, the
Company does not expect to use the proceeds of the initial public offering to
fund operations. The Company currently has no commitments for material capital
expenditures. However, future operating requirements and capital needs may be
subject to economic conditions and other factors, many of which are beyond the
Company's control.
The Company will continue to use the remaining net proceeds from the initial
public offering for general corporate purposes including acquisitions. See Note
D - PURCHASE OF MASTER DATA CENTER and Note G SUBSEQUENT EVENTS. Pending such
uses, the remaining net proceeds will be invested in short-term, investment
grade securities.
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INFORMATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
SEASONALITY
The Company's business is somewhat seasonal, with revenues typically reaching
slightly higher levels during the third and fourth quarters of each calendar
year, based on historical publication schedules. In 1998, 30% of the Company's
revenues were generated during the fourth quarter with the first, second and
third quarters accounting for 23%, 22% and 25% of revenues, respectively. In
addition, the Company may experience fluctuation in revenues from period to
period based on the timing of acquisitions and new product launches.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer systems that use two digits rather
than four to define the applicable year, which may prevent such systems from
accurately processing dates ending in the Year 2000 and after. This could result
in system failures or in miscalculations causing disruption of operations,
including, but not limited to, an inability to process transactions, to send and
receive electronic data, or to engage in routine business activities and
operations.
The Company has completed its assessment of all currently used computer systems
and is in the final stages of completing a plan of action to correct those areas
that will be affected by the Year 2000 issue. Conversion of all critical data
processing systems is virtually complete. The Company anticipates that the
conversion of the remaining critical systems and all non-critical systems will
be completed by the end of October 1999. Presently, the Company has completed
the conversion of all environmental equipment, telephones, personal computer
hardware and software outside of the Company's information systems.
The Company expects the cost for all upgrades to be approximately $200,000; the
cost incurred to date is $50,000. The estimate includes internal costs, but
excludes the costs to upgrade and replace systems in the normal course of
business. The Company's goal is to complete any upgrade requirements by the end
of fiscal 1999, but does not expect that the cost for subsequent upgrades will
be material to the Company's consolidated financial statements.
Management's assessment of the risks associated with the Year 2000 project and
the status of the Company's contingency plans are unchanged from that described
in the 1998 annual report on Form 10-K.
FORWARD-LOOKING STATEMENTS
The information above contains forward-looking statements, including, without
limitation, statements relating to the Company's plans, strategies, objectives,
expectations, and intentions that are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. Readers are
cautioned that forward-looking statements contained in this Form 10-Q should be
read in conjunction with the Company's disclosures under the heading IMPORTANT
FACTORS RELATING TO FORWARD-LOOKING STATEMENTS contained in the Company's 1998
Annual Report on Form 10-K.
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INFORMATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
The following report relates to the Company's initial public offering:
Commission file number of registration statement: 333-56665
Effective Date: August 6, 1998
<TABLE>
<S> <C>
Expenses incurred through June 30, 1999:
Underwriting discounts $ 3,887,747
Other expenses $ 1,589,413
Total expenses $ 5,477,160
Application of proceeds through June 30, 1999:
Acquisition of product lines $ 7,186,700
Temporary investments (US Treasury Bills) $ 44,004,412
</TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's Annual Meeting of Stockholders on April 27, 1999 a
total of 16,277,413 shares, or 96%, of outstanding shares were represented and
entitled to vote.
(a) The following members were elected to the Board of Directors:
<TABLE>
<CAPTION>
Total Vote For Total Vote Withheld
Each Director From Each Director
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<S> <C> <C>
Michael E. Danzinger 16,264,663 12,750
David R. Haas 16,267,813 9,600
Sidney Lapidus 16,267,663 9,750
David E. Libowitz 16,267,813 9,600
Mason P. Slaine 16,267,813 9,600
</TABLE>
(b) The following proposal was approved:
Ratification of Ernst & Young LLP as the independent auditors for the Company
for the 1999 fiscal year.
<TABLE>
<S> <C>
Affirmative Votes 13,806,799
Negative Votes 410
Abstain 2,470,204
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 Employment Agreement, dated May 17, 1999, between CRC Press
LLC and Norman R. Snesil.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
1 Current Report on Form 8-K dated May 19, 1999 (earliest event
reported May 17, 1999), Item 5 was reported. The registrant
announced that it had agreed to acquire all of the outstanding
stock of Master Data Center, Inc., a Michigan corporation, for
consideration of approximately $33,000,000.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INFORMATION HOLDINGS INC.
Date: August 2, 1999 By: /s/ Vincent A. Chippari
------------------ ------------------------------------------
Vincent A. Chippari
Executive Vice President and Chief
Financial Officer
Signing on behalf of the registrant and
as principal financial and accounting officer
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 17, 1999, between CRC
PRESS LLC, a Delaware limited liability company (the "Company"), and Norman R.
Snesil (the "Executive").
R E C I T A L S:
WHEREAS, the Company recognizes that the future growth,
profitability and success of the Company's business will be substantially and
materially enhanced by the employment of the Executive by the Company;
WHEREAS, the Company desires to employ the Executive and the
Executive has indicated his willingness to provide his services, on the terms
and conditions set forth herein;
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
Section 1. EMPLOYMENT.
(a) DUTIES. The Company hereby agrees to employ the Executive
and the Executive hereby accepts employment with the Company, on the terms and
subject to the conditions hereinafter set forth. Subject to the terms and
conditions contained herein, the Executive shall serve as President and Chief
Executive Officer of the Company and, in such capacity, shall report to the
Chairman and Board of Directors of the Company (the "Board of Directors") and
shall have such duties as are typically performed by a President and Chief
Executive Officer of a corporation, together with such additional duties,
commensurate with the Executive's position as President and Chief Executive
Officer of the Company, as may be assigned to the Executive from time to time by
the Chairman or Board of Directors.
(b) LOCATION. The principal location of the Executive's
employment shall be in Boca Raton, Florida, or such other place that the Company
and the Executive shall mutually deem appropriate. The Executive understands and
agrees that he may be required to travel from time to time for business reasons.
Section 2. TERM. Unless terminated pursuant to Section 6
hereof, the Executive's employment hereunder shall commence on the date hereof
and shall continue during the period ending on the second anniversary of the
date hereof (the "Employment Term").
Section 3. Compensation.
(a) SALARY. As compensation for the performance of the
Executive's services hereunder, the Company shall pay to the
<PAGE>
Executive a salary (the "Salary") of $225,000 per annum. The Salary shall be
payable in accordance with the payroll practices of the Company as the same
shall exist from time to time. In no event shall the Salary be decreased during
the Employment Term.
(b) BONUS PLAN. The Executive shall be eligible to receive an
annual cash bonus in an amount up to 50% of the Salary ("Bonus"), based upon
meeting objectives determined by the Chairman and the Board of Directors;
PROVIDED, HOWEVER, that 50% of the Bonus for the first twelve months of the
Employment Term shall be paid to the Executive in advance in equal installments
in accordance with the payroll practices of the Company as the same shall exist
from time to time over the course of the first twelve months of the Employment
Term, provided that the Executive remains employed throughout such period (the
"Advance Bonus"). The portion of the Bonus in excess of the Advance Bonus
received by the Executive following each calendar year, if any, shall be paid
after the Company's financial results for the relevant year are finally
determined.
(c) BENEFITS. In addition to the Salary and Bonus, the
Executive shall be entitled to participate in health, insurance, pension,
automobile and other benefits provided to other senior executives of the Company
on terms no less favorable than those available to such other senior executives
of the Company; PROVIDED HOWEVER, that the automobile benefit shall not exceed
$1,000 per month. The Executive shall also be entitled to the same number of
vacation days, holidays, sick days and other benefits as are generally allowed
to other senior executives of businesses of comparable size and geography as the
Company.
(d) STOCK OPTIONS. The Executive shall receive, as of the date
hereof, an option to acquire 50,000 shares of the common stock of the Company's
parent (the "Option"). The exercise price of the Option shall be equal to the
closing market price of the common stock of the Company's parent on the date of
grant. The Option shall vest as to 16,666 shares on the first anniversary of the
date of grant, as to an additional 16,667 shares on the second anniversary of
the date of grant and as to the remaining 16,667 shares on the third anniversary
of the date of grant. The Executive acknowledges and agrees that the grant of
Option is conditioned upon the execution of the standard option agreement of the
Company's parent (the "Option Agreement"). The Option shall be governed by (and
shall be subject in all instances to) the Option Agreement. As set forth in the
stock option plan of the Company's parent (the "Option Plan"), upon a Change of
Control (as such term is defined in the Option Plan), all Option shares owned by
the Executive shall vest and become immediately exercisable as of the date
immediately preceding the date of such Change of Control.
Section 4. EXCLUSIVITY. During the Employment Term, the
Executive shall devote his full time to the business of the
-2-
<PAGE>
Company, shall faithfully serve the Company, shall in all respects conform to
and comply with the lawful and reasonable directions and instructions given to
him by the Chairman and Board of Directors in accordance with the terms of this
Agreement, shall use his best efforts to promote and serve the interests of the
Company and shall not engage in any other business activity, whether or not such
activity shall be engaged in for pecuniary profit, except that the Executive may
(i) participate in the activities of professional trade organizations related to
the business of the Company and (ii) engage in personal investing activities,
PROVIDED that activities set forth in these clauses (i) and (ii), either singly
or in the aggregate, do not interfere in any material respect with the services
to be provided by the Executive hereunder.
Section 5. REIMBURSEMENT FOR EXPENSES. The Executive is
authorized to incur reasonable expenses in the discharge of the services to be
performed hereunder, including expenses for travel, entertainment, lodging and
similar items in accordance with the Company's expense reimbursement policy, as
the same may be modified by the Board of Directors from time to time. The
Company shall reimburse the Executive for all such proper expenses upon
presentation by the Executive of itemized accounts of such expenditures in
accordance with the financial policy of the Company, as in effect from time to
time.
Section 6. TERMINATION.
(a) DEATH. This Agreement shall automatically terminate upon
the death of the Executive, and upon such event, the Executive's estate shall be
entitled to receive the amounts specified in Section 6(e) below as if
termination had occurred without Cause (as defined below).
(b) DISABILITY. If the Executive is unable to perform the
duties required of him under this Agreement because of illness, incapacity, or
physical or mental disability, this Agreement shall remain in full force and
effect and the Company shall pay all compensation required to be paid to the
Executive hereunder, unless the Executive is unable to perform the duties
required of him under this Agreement for an aggregate of 180 days (whether or
not consecutive) during any 12-month period during the term of this Agreement,
in which event this Agreement (other than Sections 6(e), 7, 8, 9, 10, 11 and 12
hereof), including, but not limited to, the Company's obligations to pay any
Salary or to provide any privileges under this Agreement, shall terminate at the
end of the 180 days of complete disability.
(c) CAUSE. The Company may terminate the Executive's
employment during the Employment Term for "Cause" as that term is defined below.
In the event of termination pursuant to this Section 6(c) for Cause, the Company
shall deliver to the Executive written notice setting forth the basis for such
termination, which notice shall set forth the nature of the Cause
-3-
<PAGE>
which is the reason for such termination. Termination of the Executive's
employment hereunder shall be effective upon delivery of such notice of
termination. For purposes of this Agreement, "Cause" shall mean: (i) the
Executive's failure (except where due to a disability contemplated by Section
6(b) hereof), neglect or refusal to perform the duties of his position hereunder
which failure, neglect or refusal shall not have been corrected by the Executive
within 30 days of receipt by the Executive of written notice from the Company of
such failure, neglect or refusal, which notice shall set forth the nature of
said failure, neglect or refusal; (ii) any willful or intentional act of the
Executive that has the effect of injuring the business of the Company or its
affiliates in any material respect; (iii) any continued or repeated absence from
the Company, unless such absence is (A) approved or excused by the Board of
Directors or (B) is the result of the Executive's illness, or incapacity (in
which event the provisions of Section 6(b) hereof shall control); (iv) use of
illegal drugs by the Executive or repeated drunkenness; (v) conviction of the
Executive for the commission of a felony or (vi) the commission by the Executive
of an act of fraud or embezzlement against the Company.
(d) RESIGNATION. The Executive shall not have the right to
terminate his employment at any time during the Employment Term.
(e) PAYMENTS. In the event that the Executive's employment
hereunder terminates for any reason, the Company shall pay to the Executive all
amounts accrued but unpaid hereunder through the date of termination in respect
of Salary, unused vacation or unreimbursed expenses. Notwithstanding the
foregoing, the Executive shall not be entitled to receive any additional
payments if he (i) is terminated for Cause, (ii) terminated by the Company
pursuant to Section 6(f) hereof or (iii) resigns in violation of Section 6(d)
hereof. In the event the Executive's employment hereunder is terminated by the
Company without Cause (and without notice as provided in Section 6(f) hereof),
in addition to the amounts specified in the foregoing sentence, (i) the
Executive shall continue to receive the Salary (less any applicable withholding
or similar taxes) at the rate in effect hereunder on the date of such
termination periodically, in accordance with the Company's prevailing payroll
practices, for the shorter (A) a period of eighteen (18) months following the
date of such termination or (B) the remainder of the Employment Term (the
"Severance Term") and (ii) the Executive (and/or his covered dependents) shall
continue to receive any health or insurance benefits provided to him as of the
date of such termination in accordance with Section 3(c) hereof during the
Severance Term. Amounts owed by the Company in respect of the Salary or
reimbursement for expenses under the provisions of Section 5 hereof shall,
except as otherwise set forth in this Section 6(e), be paid promptly upon any
termination. Upon any termination of the Executive's employment for any reason,
all of the rights, privileges, duties and obligations of the Executive
-4-
<PAGE>
hereunder shall cease, except for his rights under this Section 6(e) and his
obligations under Sections 7, 8, 9, 10, 11 and 12 hereunder.
(f) TERMINATION BY COMPANY NOTICE. On or after the the first
anniversary of the date hereof, the Company may terminate the Executive without
cause and for any reason, upon 180 days' written notice to the Executive. In the
event of such termination by notice, the Executive shall be entitled to those
payments provided for in the first sentence of Section 6(e) hereof.
Section 7. NON-DISCLOSURE, NON-INTERFERENCE AND
INVENTIONS.
(a) NO COMPETING EMPLOYMENT. The Executive acknowledges that
the agreements and covenants contained in this Section 7 are essential to
protect the value of the Company's business and assets and by his current
employment with the Company and its subsidiaries, the Executive has obtained and
will obtain such knowledge, contacts, know-how, training and experience and
there is a substantial probability that such knowledge, know-how, contacts,
training and experience could be used to the substantial advantage of a
competitor of the Company and to the Company's substantial detriment. Therefore,
the Executive agrees that for the period commencing on the date of this
Agreement and ending on the first anniversary of the termination of the
Executive's employment hereunder (such period is hereinafter referred to as the
"Restricted Period"), the Executive shall not participate or engage, directly or
indirectly, for himself or on behalf of any person or entity, in any business
activities which compete with the business of the Company; PROVIDED, HOWEVER,
that the foregoing shall not preclude the Executive from owning less than 1% of
the shares of a public company.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive,
except in connection with the performance of his duties hereunder, shall not
disclose to any person or entity or use, either during the Employment Term or at
any time thereafter, any information not in the public domain or generally known
in the industry, in any form, acquired by the Executive while employed by the
Company or any predecessor to the Company's business or, if acquired following
the Employment Term, such information which, to the Executive's knowledge, has
been acquired, directly or indirectly, from any person or entity owing a duty of
confidentiality to the Company or any of its subsidiaries or affiliates,
relating to the Company, its subsidiaries or affiliates. The Executive agrees
and acknowledges that all of such information, in any form, and copies and
extracts thereof, are and shall remain the sole and exclusive property of the
Company, and upon termination of his employment with the Company, the Executive
shall return to the Company the originals and all copies of any such information
-5-
<PAGE>
provided to or acquired by the Executive in connection with the performance of
his duties for the Company, and shall return to the Company all files,
correspondence and/or other communications received, maintained and/or
originated by the Executive during the course of his employment.
(c) NO INTERFERENCE. During the Restricted Period, the
Executive shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), directly or indirectly solicit, endeavor to entice away from
the Company or its subsidiaries, or otherwise directly interfere with the
relationship of the Company or its subsidiaries with, any person who, to the
knowledge of the Executive, is employed by or otherwise engaged to perform
services for the Company or its subsidiaries (including, but not limited to, any
independent sales representatives or organizations) or who is, or was within the
then most recent twelve-month period, a customer or client, of the Company, its
predecessors or any of its subsidiaries. The placement of any general classified
or "help wanted" advertisements and/or general solicitations to the public at
large shall not constitute a violation of this Section 7(c) unless the
Executive's name is contained in such advertisements or solicitations.
(d) INVENTIONS, ETC. The Executive hereby sells, transfers and
assigns to the Company or to any person or entity designated by the Company all
of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by the Executive, solely or
jointly, during his employment by the Company which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company, or which otherwise relate to or
pertain to the business, functions or operations of the Company or which arise
from the efforts of the Executive during the course of his employment for the
Company. The Executive shall communicate promptly and disclose to the Company,
in such form as the Company requests, all information, details and data
pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
necessary or required of the Executive to permit the Company or any person or
entity designated by the Company to file and prosecute the patent applications
and, as to copyrightable material, to obtain copyright thereof. Any invention
relating to the business of the Company and disclosed by the Executive within
one year following the termination of his employment with the Company shall be
deemed to fall within the provisions of this paragraph unless proved to have
been first conceived and made following such termination.
-6-
<PAGE>
Section 8. INJUNCTIVE RELIEF. Without intending to limit the
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 7 hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction, without the necessity of
proving irreparable harm or injury as a result of such breach or threatened
breach of Section 7 hereof, restraining the Executive from engaging in
activities prohibited by Section 7 hereof or such other relief as may be
required specifically to enforce any of the covenants in Section 7 hereof.
Section 9. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE.
The Executive represents and warrants to the Company as follows:
(a) This Agreement, upon execution and delivery by the
Executive, will be duly executed and delivered by the Executive and (assuming
due execution and delivery hereof by the Company) will be the valid and binding
obligation of the Executive enforceable against the Executive in accordance with
its terms.
(b) Neither the execution and delivery of this Agreement nor
the performance of this Agreement in accordance with its terms and conditions by
the Executive (i) requires the approval or consent of any governmental body or
of any other person or (ii) conflicts with or results in any breach or violation
of, or constitutes (or with notice or lapse of time or both would constitute) a
default under, any agreement, instrument, judgment, decree, order, statute,
rule, permit or governmental regulation applicable to the Executive. Without
limiting the generality of the foregoing, the Executive is not a party to any
non-competition, non-solicitation, no hire or similar agreement that restricts
in any way the Executive's ability to engage in any business or to solicit or
hire the employees of any person.
The representations and warranties of the Executive contained
in this Section 9 shall survive the execution, delivery and performance of this
Agreement.
Section 10. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY
BENEFICIARIES. This Agreement shall inure to the benefit of, and be binding
upon, the successors and assigns of each of the parties, including, but not
limited to, the Executive's heirs and the personal representatives of the
Executive's estate; PROVIDED, HOWEVER, that neither party shall assign or
delegate any of the obligations created under this Agreement without the prior
written consent of the other party. Notwithstanding the foregoing, the Company
shall have the unrestricted right to
-7-
<PAGE>
assign this Agreement and to delegate all or any part of its obligations
hereunder to any of its subsidiaries or affiliates, but in such event such
assignee shall expressly assume all obligations of the Company hereunder and the
Company shall remain fully liable for the performance of all of such obligations
in the manner prescribed in this Agreement. Nothing in this Agreement shall
confer upon any person or entity not a party to this Agreement, or the legal
representatives of such person or entity, any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement.
Section 11. WAIVER AND AMENDMENTS. Any waiver, alteration,
amendment or modification of any of the terms of this Agreement shall be valid
only if made in writing and signed by the parties hereto; PROVIDED, HOWEVER,
that any such waiver, alteration, amendment or modification is consented to on
the Company's behalf by the Board of Directors. No waiver by either of the
parties hereto of their rights hereunder shall be deemed to constitute a waiver
with respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
Section 12. SEVERABILITY AND GOVERNING LAW. The Executive
acknowledges and agrees that the covenants set forth in Section 7 hereof are
reasonable and valid in geographical and temporal scope and in all other
respects. If any of such covenants or such other provisions of this Agreement
are found to be invalid or unenforceable by a final determination of a court of
competent jurisdiction (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 13. NOTICES.
(i) All communications under this Agreement shall be in
writing and shall be delivered by hand or mailed by overnight courier or by
registered or certified mail, postage prepaid:
(1) if to the Executive such address as the Executive may have
furnished the Company in writing,
(2) if to the Company, at c/o Information Holdings Inc., 2777 Summer
Street, Stamford, Connecticut 06905, marked for the attention of the President
and Chief Executive Officer, or at such other address as it may have furnished
in writing to the Executive, or
-8-
<PAGE>
(ii) Any notice so addressed shall be deemed to be given: if delivered
by hand, on the date of such delivery; if mailed by courier, on the first
business day following the date of such mailing; and if mailed by registered or
certified mail, on the third business day after the date of such mailing.
Section 14. SECTION HEADINGS. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 15. ENTIRE AGREEMENT. This Agreement constitutes the
entire understanding and agreement of the parties hereto regarding the
employment of the Executive. This Agreement supersedes all prior negotiations,
discussions, correspondence, communications, understandings and agreements
between the parties relating to the subject matter of this Agreement.
Section 16. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together shall be considered one and the same agreement.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
CRC PRESS LLC
By: /s/Mason Slaine
------------------------------------
Mason Slaine
Chairman
By: /s/Norman R. Snesil
------------------------------------
Norman R. Snesil
-10-
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